Remember how your broker makes money

You get a broker or start working with a brokerage firm. Your thoughts focus on how you’re going to make money by putting the assets you already control into your investment portfolio. You know that it’s crucial for your retirement.

As you do this, don’t forget how your broker makes money. They likely get paid when they make trades for you. Each trade generates a commission. There may be other fees as well.

If you use an online broker, you do most of the work yourself, and you decide when and what you want to trade. While this might seem easy, it puts a lot of pressure on you to make the right investment decisions.

Instead, you may choose a full-service broker. You’ll actually meet with this person and probably give them access so that they can make trades in your name.

The potential problem here is that your broker is then paid directly for a service that they can decide to use at any time. When they use that service, do they really have your best interests in mind when they make that trade, or would you have been better off to stay with your money where it was? On the extreme end, are they making scores of small, unhelpful trades to try to take as much money in commissions as they can before you notice?